Fitch: U.S. Consumer Continues to Anchor Credit Card ABS

NEW YORK--()--The sail continues to be smooth for U.S. credit card ABS thanks largely to the improving health of U.S. consumers, according to the latest index results from Fitch Ratings. Delinquencies plunged to new lows while excess spread reached record highs, proving Fitch's initial indicators from mid-April correct.

Fitch's May indices cover performance during the April collection period.

Last week's announcement of a five-year high for consumer confidence in May coupled with good news for home prices are collectively supportive of Fitch's assertion that consumers may be beginning to feel more prosperous.

Though tepid first-quarter GDP results and disappointing jobless claims last month have since tempered the optimism somewhat, U.S. consumers will continue to chip away at their debt, which augurs well for credit card ABS performance through the remainder of the year.

As such, Fitch anticipates stability in credit card ABS ratings for the foreseeable future given the robust enhancement levels and the structural features afforded to investors.

For the second consecutive month, Fitch's Prime 60+ Day Delinquency Index reached a record low by declining to 1.48% in May. This represents a 4.5% drop in the level of 60+ day delinquencies month-over-month (MOM).

Recent declines in 60+ delinquencies have contributed to continued positive performance of Fitch's Prime Credit Card Chargeoff Index, which for May, declined an additional six basis points (bps) MOM to reach 3.92%.

Gross yield softened slightly from April, when it attained a 15-month high. The Fitch Prime Gross Yield Index declined by 79 bps to 17.98% in May. In fact, prime gross yield has declined every May since Fitch created its credit card ABS index back in 1991. Additionally, the Fitch Prime Three-Month Average Excess Spread Index increased 21 bps MOM to reach a new high of 11.73% in May.

Fitch's Prime Monthly Payment Rate (MPR) Index decreased to 23.52% in May, a nearly 4% decline MOM. MPR, which measures how quickly cardholders are paying down outstanding balances, remains strong by historical standards.

Fitch's Prime Credit Card Index was established in 1991 and tracks over $110 billion of prime credit card ABS. The index is primarily comprised of general purpose portfolios originated by institutions such as Bank of America, Citibank, Chase, Capital One, Discover, etc.

While performance for prime credit card ABS remains stellar, retail card loans did see some weakening last month. The Fitch Retail Chargeoff Index increased nearly 15% MOM to reach 6.91%. However, the Fitch Retail 60+ Day Delinquency Index declined by almost 4.5% MOM to 2.45% in May. This is two bps off the index's historical low and may be indicative of lower retail credit card ABS chargeoffs in the coming months.

Gross yield and three-month average excess spread also declined in May. However, those declines were from historic highs and remain healthy in the context of their historical performance. The Fitch Retail Gross Yield Index declined by 38 bps MOM to 27.52%. This represents the second consecutive month of decline from the high of 28.59% reached in March 2013. Fitch's Retail Three-Month Average Excess Spread Index declined 44 bps in May to 17.08%.

Fitch's Retail Credit Card Index tracks more than $21 billion of retail or private label credit card ABS. The index is primarily comprised of private label portfolios originated and serviced by Citibank (South Dakota) N.A., GE Money Bank and World Financial Network National Bank. More than 165 retailers are incorporated including Wal-Mart, Sears, Home Depot, Federated, Loews, J.C. Penney, Limited Brands, Best Buy, Lane Bryant and Dillard's, among others.

Additional information is available at 'www.fitchratings.com'.

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

Contacts

Fitch Ratings
Steven Stubbs, +1-212-908-0676
Senior Director
Fitch Ratings, Inc.
One State Street Plaza
New York, NY 10004
or
Michael Dean, +1-212-908-0556
Managing Director
or
Media Relations
Sandro Scenga, New York, +1-212-908-0278
sandro.scenga@fitchratings.com

Contacts

Fitch Ratings
Steven Stubbs, +1-212-908-0676
Senior Director
Fitch Ratings, Inc.
One State Street Plaza
New York, NY 10004
or
Michael Dean, +1-212-908-0556
Managing Director
or
Media Relations
Sandro Scenga, New York, +1-212-908-0278
sandro.scenga@fitchratings.com